2.1.1.

Scope of the Project

The envisaged project will be a three star hotel. According, to the standard given by the Ethiopian
Tourism Commission, the project will provide the following services.

• Bed room services and related facilities.

• Food and beverage services

• Conference Hall rent service

• Jacuzzi and Sauna bath

• Tourism Information Services,

• Sales of Newspaper, magazines, books, post card,

• Laundry Services,

• Indoor games, table tennis and children play ground services,

• Pool game,

• Beauty salon,

• First idea Services,

2.1.2. History of the project

The initiation of this project idea was emerged after observing serious shortage of quality hotel service
in Addis Ababa.

Therefore, before selecting the ideal place for the project, the promoter discussed about the viability of
the envisaged project with professional businessmen who have already been in hotel business. Next,
the promoter made assessment on the locations of the project, and has decided to get secured the land
and to prepare project proposal.

2.1.3. Promoter's Background

Ato Kidane Tedla is a young and successful entrepreneur. He has been in business since 1975, and now
he is doing excllent business local and abroad. He has rich experience in Import-Export business having
excellent contacts with many international companies. He has also wide knowledge in hotel services. His
frequently travel to abroad for business purposes have exposed him to taste the quality of hotel services
at international standard. The promoter has also adequate educational background. He communicates
well in English and he also speaks moderate Italian and Arabic.

On top of this, he is highly devoted to social development activite. He is one of the model entrepreneurs
in beautifying Addis Ababa. He built a green area in front of the old Post Office, which is one of the best
green areas available in the city. Furthermore, he built a school worth of Birr 3 million in Tigray region,
and submitted it to the Regional Education Bureau. At present, the school admits for more than 1600
students. He is also a member of the Committee for the Development of Debredamo Monastery. The
monastery has got access to hydroelectric and telephone facilities at his sole contribution.

III. MARKET STUDY

3.1. GENERAL

Ethiopia is endowed with many natural and historical tourist attractions. The Southern part of Ethiopia is
rich in natural endowments such as wild life, different types of animals, lakes, while the Northern
Ethiopia is known for its historical sites and terrains. If these two geographical sites, properly handled
and facilities are fulfilled, the flow of tourists in Ethiopia will definitely attract as many as that of Kenya
and Egypt.

So far the UNESCO has recognized Eight Ethiopian heritages as World Heritage sites. These include
Axum, Lalibelas Rock Hewa Churches, Gonder Cassele, the Monasteries and churches in the Isalands of
Lake Tane, Hadar (Afar), Tia's carred standing stones (south), the wall of city Harar and the Semien
mountain park.

How ever, the tourism industry in Ethiopia has not yet development. The income that generates from
tourism in Ethiopia in Comparison with those of Kenya and Egypt is incomparable. Shortages of tourist
facilities and limited promotion have curbed development of tourism industry in Ethiopia. At present, a
policy has been drawn on tourist development, and a long-term strategy is designed. Accordingly, the
flow of tourism is nowadays-increasing from year to year, and the demand for tourist facilities such as
hotels are growing.

3.2. TYPE OF SERVICE

According to the Council of Ministers Regulation No. 209/1995, Hotel means an establishment offering
lodging, food, beverage and, as may be necessary, recreational facilities to the public. The regulation
further classifies hotels into stars (one up to five stars), and basic level hotel. The grading of a hotel
depends on structural features, furnishing, fitting, equipment and internal decoration, skill of staff
quality and variety of meals, safety and hygiene, and other amenities provide in a hotel.

The proposed grade of the envisage project will be a three-star hotel, and it will meet the given
minimum standard for a three star hotel.

3.3. DEMAND DETERMINATION

3.3.1. Factors affecting demand for a hotel

There are various factors that affect demand for hotel service. The major ones to be considered in the
envisaged project are presented below.

• Tourist flow to the country;

• Facilities quality, and varieties of food;

• Structural features and Internal decoration of the building;

• Safety and Hygiene of the Hotel;

• Promotion and good will;

• Price of hotel services;

• Location and site

• Security (political stability) of a country

• Income of the population

• Population size of the target group

Price of the hotel will be competitive and flexible. The envisaged project will adopt ideal pricing strategy.
The price will be seasonal that floats with the flow of tourists. When the flow of tourists is high the price
will be increased and vice versa. Ethiopia is among the most peaceful and political stable country in
Africa. The location of the envisaged project has its own advantage. Addis Ababa is the principal
gateway to Ethiopia for tourists. As a business center and a conference venue, it is also a major
destination for African and International diplomats. Addis is one of the highest diplomat cities in Africa.
Hence, entering into a hotel business is lucrative in Addis.

3.3.2 Volume, and Value of Domestic Demand

In Ethiopia there are public and private hotels ranging their grades form basic hotels to a five star hotels.
Many of the public hotels do not meet the standard level but Ethiopia Hotel, Ghion Hotel, Webeshibele
Hotel, and Ras Hotel in Addis Ababa. However, private hotels ranging from ordinary to a five star are
mushrooming. Actually, more concerned with the three to five stars grade hotels because these are the
competitive hotels in the hotel industry. Demand for the envisaged hotel depends on providing the
following services.

• Restaurant and Bar services

• Jacuzzi and Steam Bath service

• Beauty Saloon

• Pool Game and GYM

• Business Center /internet/

• Gift Shop

• Air ticket service

• Parking

The market group for the envisage a three stare hotel are expected to be mainly foreign visitors, foreign
delegations, regional Administration officials, intercity conference participants, Business men, transit
passengers, managers and high income Ethiopians. Other factors remain constant the demand for the
high level hotels in Addis is assumed to be the foreign visitors. Data of the year 2006 is taken as abase to
forecast the flow of tourists.

Tourist Flow

Global tourism represents 3.5 trillion being 10% of world GPD and providing job opportunities for more
than 200million in the year 2002, 156,327. Number of foreign tourists who visited Ethiopia was limited
to 156,327. The political stability accompanied by opening of the Ethiopian Airlines has more new routes
of the Ethiopian Airlines; the

figure has doubled in the current year to the World. The flow of tourist is projected to grow by 20% per
year for the coming ten years. Projection of tourist flow and the demand for hotel service is presented in
Table 3.1 below.

Table 3.1 Current Tourists flow and projection for the next ten years
Year Actual 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

No. Of

Tourists[

312,654 375,185 450,222 540,266 648,319 777,983

933,580 1,120,296 1,344,355 1,613,226 1,935,875

\\\

Conferences and participants

Ethiopia entertains different International and national conferences, for various purposes such as
workshops, regular meetings assemblies, etc. International conferences and meetings demand for
international hotels and conference rooms. Moreover, the meetings of inter- regional governmental
meetings demand for high rated hotel service. Despite there is no available data on these areas; some
assumptions are taken to estimate the current status that enables us to fore cost the demand. Assuming
five local and one international conference will take place per day with 100 local attendants and 50
foreigners, in Addis, total participants will be 180,000 local and 18,000 international. Assuming further a
20% annual increase, flow of conference participants is projected below.

Table 3.2 Forecasted flow of conference participants

Year Est.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Local

Conference 180,000 216,000 259,200 310,040 373,248 447898

537477 644973 773967 928760 1114513

International

Conference 18,000 21,600 25,920 31,004 37,325 44790 53748 64497 77397 92876 111451

Total

Participants 198,000 237,600 285,120 341,044 410,573 492688

591225 709470 851364 1021636 1225964

3.3.3 Aggreg